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Pegasus Capital Advisors has become a partner in beauty brand Carol’s Daughter, setting the stage for an investment-driven expansion that is aimed at growing the business as much as tenfold over the next few years.
This story first appeared in the December 21, 2007 issue of WWD. Subscribe Today.
Pegasus, based in Greenwich, Conn., has made available $50 million of the group’s investment funds, said sources, allowing Carol’s Daughter to open more stores, sharply focus its online platform and recruit marketing and operational talent to build the brand’s infrastructure. “The popularity of the multiethnic market has been long ignored, and it is a huge opportunity,” said Steve Stoute, who is Carol’s Daughter’s chairman, during an interview at his Manhattan offices. “Our partnership with Pegasus gives us the opportunity to take my vision and Lisa’s [Price, Carol’s Daughter’s founder] to another level.”
In fact, Stoute said, he plans to take the $20 million Carol’s Daughter brand to $250 million to $300 million within the next five years. “We’re not a brand that came around for two and a half years and then fizzled out,” said Stoute. “We have Will Smith, Jada Pinkett Smith, Jay-Z and Mary J. Blige as believers. I’m being very aggressive because there is a huge opportunity there.”
And he’s definitely looking for help and is ready to hire. “If you believe in going against the grain and are aware of how the new generation’s needs should be focused, I’m looking to hire you,” said Stoute. “A lot of people are cutting back these days. We are aggressively going forward. We feel the market is ripe for growth. I want to turn what some consider a niche into mainstream. It needs to be managed as a best-of-class brand.”
Stoute sees direct marketing — online and TV shopping channels — as one particularly ripe area for increased revenues.
“We want to touch the customer directly — that offers the best margins and the consumer prefers it,” said Stoute. “The market has changed from consumers getting sprayed down at the cosmetics counter. You need to touch them in a different way. We know the value of telling our story directly, as opposed to letting someone else do it for us. And word of mouth is priceless. Like I tell movie guys, you’ve got to have a good trailer.”
As well, Stoute said, growth in existing retail partners Sephora and Macy’s will continue. “We are looking for growth in all doors,” he said. Stoute also said he wants to double, year-over-year, the number of Carol’s Daughter freestanding stores, which now number eight.
Sephora has aggressive plans for the brand, according to Betsy Olum, senior vice president of marketing for the perfumery chain. Carol’s Daughter is now carried in 75 Sephora doors, and plans call for distribution to increase to 140 doors by March. Olum declined to cite numbers, but industry sources estimate that the increase in distribution could result in a jump in volume from $5 million to $13 million or $15 million.
“There is great affinity for the product on the part of our clients,” Olum said. “Strategically it is an important brand for us.” She added, “It strengthened our position with women of color,” as well as drew more hip, young urban traffic.
Mary J. Blige did an appearance for the brand at one of Sephora’s stores and “that was just incredible. We are trying to leverage some of the [brand’s] star power,” said Olum.
The brand’s Web site, which was recently named one of the Top 100 Companies to Emulate by Internet Retailer, also has massive growth potential, said Stoute. Others on the list include Apple and Coach. “The Pegasus Group deal will help to further build our online platform,” said Stoute. “The digital channel is extremely robust and it will only grow from here.”
An expanded color cosmetics business — the brand entered the category this past spring with a lip gloss line — and improved hair products and body products are also on Stoute’s blueprint for growth. But he refuses to pin things down too much. “I don’t want to have a template outlook for the future,” he said. “I want to react to all market opportunities.”
Stoute sold a stake in his Translation Consultation and Brand Imaging firm six weeks ago to ad giant Interpublic Group. The deal, which is said to have been for about $15 million, also gives Stoute capital to grow that business, as well.